LEGAL ENVIRONMENT OF BUISNESS M2

Definition of Contract

An oral or written agreement where one party promises to do or not do something for another in exchange for consideration.

Unilateral Contract

A promise for performance.

Bilateral Contract

A promise for a promise; both parties exchange promises.

Express Contract

Contract created through written or spoken words.

Implied-in-Fact Contract

Contract formed through conduct rather than words.

Implied-in-Law Contract (Quasi Contract)

Court-created obligation to prevent unjust enrichment when no contract exists.

Valid Contract

All required elements exist and the contract is enforceable.

Void Contract

Missing required elements and cannot be enforced.

Voidable Contract

Valid contract but one party has legal ability to cancel it.

Executed Contract

Fully performed contract.

Executory Contract

Contract that has not yet been fully performed.

Elements of a Valid Contract

Agreement, consideration, capacity, lawful purpose, voluntary consent.

Statute of Frauds

Certain contracts must be in writing to be enforceable.

Offer

A proposal by the offeror to enter a contract.

Offeror

The party who initiates the contract.

Offeree

The party who receives the offer.

Essential Terms of an Offer

Parties, price, performance, subject matter, quantity.

Invitation to Offer

Ads, auctions, catalogs, and price tags that invite offers rather than create them.

Objective Theory of Contracts

Contract intent judged by what a reasonable person would believe.

Subjective Theory

Personal intent of the parties (not used by courts).

Revocation

Offeror withdrawing an offer before acceptance.

Rejection

Offeree refusing the offer.

Counteroffer

A response to an offer that changes its terms.

Lapse of Time

Offer ends after a reasonable time.

Termination by Death or Insanity

Offer ends if either party dies or becomes insane.

Intervening Illegality

Offer ends if the contract becomes illegal.

Impossibility of Performance

Offer ends if the subject matter is destroyed.

Mirror Image Rule

Acceptance must exactly match the offer.

Unequivocal Acceptance

Acceptance must be clear and unconditional.

Silence as Acceptance

Silence usually does not count as acceptance.

Mailbox Rule

Acceptance becomes valid when sent, not when received.

Consideration

Something of value exchanged between parties.

Legal Detriment

Each party gives up something of value.

Mutuality

Both parties must provide consideration.

Gift

Not valid consideration.

Pre-Existing Duty Rule

Doing something already required is not consideration.

Past Consideration

Something done before the agreement cannot be consideration.

Illusory Promise

A promise that does not actually bind someone.

Contract Modification Rule

Existing contracts require new consideration to be modified.

Release

Giving up the right to sue.

Accord and Satisfaction

Agreement to accept substituted performance.

Promissory Estoppel

Enforcing a promise due to reliance even without consideration.

Capacity

Legal ability to enter into a contract.

Minor

Person under 18; contracts are voidable at their option.

Ratification

Minor agreeing to a contract after turning 18.

Necessities

Essential goods or services minors must pay for.

Incompetent Person (Court Declared)

Contract is void.

Incompetent Person (Not Declared)

Contract is voidable.

Intoxication

Contracts rarely voided due to intoxication.

Lawful Purpose

Contract purpose must not violate law or public policy.

Criminal Conduct

Contracts involving crimes are void.

Tortious Conduct

Contracts involving torts are void.

Usury

Charging excessively high interest.

Restraint of Trade

Agreements that unfairly limit competition.

Covenant Not to Compete

Valid only with reasonable time and geographic limits.

Unconscionable Contract

Extremely unfair contract.

Adhesion Contract

One-sided contract imposed by stronger party.

Exculpatory Clause

Clause eliminating liability for wrongdoing.

Fraud

Intentional misrepresentation of material facts relied upon by another.

Sales Puffing

Exaggerated claims allowed in sales.

Unilateral Mistake

One party mistaken; contract voidable only if the other knew.

Bilateral Mistake

Both parties mistaken about a fact.

Duress

Contract entered due to threat or fear.

Undue Influence

Contract formed due to psychological pressure.

Statute of Frauds Writing Requirement

Certain contracts must be written to be valid.

Contracts to Pay Decedent’s Debts

Must be in writing.

Promise to Pay Another’s Debt

Must be in writing.

Prenuptial Agreements

Must be in writing.

Contracts Not Performable in One Year

Must be in writing.

Real Estate Contracts

Must be in writing.

Sale of Goods Over $500

Must be in writing under UCC.

Parol Evidence Rule

Written contract cannot be contradicted by oral statements.

Assignment

Transfer of contract rights to a third party.

Novation

Substitution of a new party with consent of all parties.

Creditor Beneficiary

Third party owed a debt under contract.

Donee Beneficiary

Third party receives a gift benefit.

Incidental Beneficiary

Third party with no enforceable rights.

Performance of Contract

Completing contractual obligations.

Condition Precedent

Event that must occur before duty to perform.

Condition Subsequent

Event that ends contractual duty.

Compensatory Damages

Payment to put injured party in position they would have been in.

Liquidated Damages

Predetermined damages stated in contract.

Nominal Damages

Small damages when breach occurred but no real loss.

Punitive Damages

Rare in contract law; meant to punish.

Rescission

Canceling the contract.

Restitution

Returning benefits received.

Reformation

Court rewriting contract to reflect true intent.

Specific Performance

Court orders party to perform the contract.

Duty to Mitigate

Injured party must try to reduce losses.

Tort

Civil wrong causing injury or damage.

Intentional Tort

Wrongful act done deliberately.

Assault

Causing fear of immediate harm.

Battery

Harmful or offensive physical contact without consent.

Intentional Infliction of Emotional Distress

Extreme conduct causing severe emotional harm.

Invasion of Privacy

Improper intrusion or disclosure of personal information.

False Imprisonment

Wrongfully restricting someone’s movement.

Malicious Prosecution

Charging someone with crime without probable cause.

Abuse of Process

Improper use of legal procedures.

Trespass

Entering property without permission.

Conversion

Taking or using another person’s property.